Oil workers in Nasiriyah, Iraq, which has ramped up output recently.
Photograph: AFP/Getty

The brent crude oil price has crashed to its lowest level in 11 years as traders fretted about global overproduction.

The global oil benchmark fell 5% to $34.62 a barrel at one stage, as signs of weakness in the Chinese and US economies soured expectations of stronger oil demand. The refusal of leading oil producers such as Saudi Arabia to cut their output has also led to a supply glut that has helped depress prices.

“With the lack of a strong upward catalyst on the horizon, we are not out of the [low oil price] woods yet,” said Miswin Mahesh, an oil market analyst at Barclays Capital, adding: “Non-Opec production from the North Sea, Canada and Brazil is falling, but not quick enough at a time when demand is weak, partly due to a mild winter in the northern hemisphere.”

New numbers showed the Chinese service sector today growing at its lowest level for 17 months while a fifth consecutive month of weaker manufacturing data led to a 7% fall in equity prices in Shanghai on Monday. They have since regained some ground.

China, the driver of recent global economic growth, is slowing faster than expected, meaning oil imports are likely to be lower than anticipated.

In the past, the Saudis have encouraged Opec (Organisation of the Petroleum Exporting Countries) to reduce its output targets during periods of low oil prices. This time it has stuck fast in what most market watchers believe is a deliberate attempt to drive competitors from the US shale fields out of business. This ploy has been only partly successful.

American output, which has surged in recent years, has remained relatively strong despite oil prices falling from their $115 peak in June 2014.

The growing rapprochement between the west and Iran has increased the likelihood of a huge increase in Iranian crude exports just as Iraq and other countries are ramping up output.

The tumbling oil price has made refined products, including petrol, cheaper. The average price of unleaded fuel fell by more than 4p a litre in December to 102.89p and reduced the cost of filling up a family-sized car by more than £2.